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WittySparks / Finance / 5 Personal Finance Tips That Will Change Your Future!
Personal Finance - managing your money

5 Personal Finance Tips That Will Change Your Future!

Finance June 25, 2018 by Nishitha

The average American can be good at making money, but terrible at managing it. Our collective personal finance IQ is extremely low, which is largely a result of our unwillingness to delay gratification.

If you’re tired of being reckless with your money, you’re ready to make a change. The following personal finance tips are incredibly simple and will help you gain control of your money so you’ll be on your way to a brighter tomorrow.

These finance tips help you gain control of your money:

1. Develop a Budget

It’s nearly impossible to practice smart personal finance without a documented budget that you revisit on at least a monthly basis. Not only do you need to know how much money you’re making and spending, but you also need a clear idea of where your money is going.

The first time you put together a budget, you might be shocked by how much you’re spending in certain categories. For example, most people are alarmed by their food budget … particularly if they eat out multiple times a week.

Drawing up a budget gives you the chance to see your money goes and then change it, rather than having your dwindling bank account dictate your decisions and behaviors.

2. Pay in Cash

The danger of spending with plastic is that you don’t necessarily know how much you have in your account. You’re also less apt to feel the sting.

For these reasons, you’re better off paying in cash. One strategy is to use an envelope system that works in conjunction with your budget.

At the beginning of each month, create envelopes for each spending category, such as groceries, dining out, shopping, etc. Place the budgeted amount of cash in the envelope and then take it with you when you go out.

This empowers you with the knowledge of exactly how much you have at any given time. It also keeps you disciplined. When the money’s gone, you don’t have anything left to spend.

3. Pay Off Your House Early

By paying off your house early, you can save tens of thousands of dollars and free up money to save, give, or spend. It sounds crazy, but you don’t have to be a wealthy person to do this.

One strategy is to make an extra mortgage payment each year. This can accelerate your timeline by four or five years. An even better move is to put your annual tax refund into the house.

The average tax refund is $3,050. “While it’s tempting to use this money to pay for a vacation, buy a new TV, or upgrade your vehicle, consider throwing it at the house,” Green Residential suggests. “Doing this over a 10-year period will equal more than $30,000 in premium payments.”

4. Start Saving for Retirement Today

Retirement tends to be something we only start paying attention to in our 50s when it’s just a few years away. But it’s an essential step you should think about when you’re in your 20s, 30s, and 40s. Using the power of compounding interest, even a middle-class American may build a nest egg of millions.

5. Avoid Car Debt

But I don’t have room in my budget to save for retirement, you may protest. Well, if you have a car payment, you’d be mistaken.

The average car payment on a new vehicle is more than $500 per month and takes five years to pay off. If you purchased a modest car in cash and invested that $500 per month, you could retire in 30 years with more than $1 million in the bank.

So the next time you see a shiny $35,000 convertible on the car lot, imagine you’re choosing between a car that will be worth $15,000 in five years or a million-dollar retirement. Isn’t that an easy decision?

Live Within Your Means

Being smart with money is all about living within your means. If you make $50,000 per year, stop living a $100,000 lifestyle. If you have a net worth of $250,000, stop trying to live like a millionaire.

It’s that simple: Spend less than you make, save the difference, and make choices for which your future self will be incredibly grateful.

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About Nishitha

Co-founder of WittySparks
WittySparks Staff

I am done with my Physiotherapy Graduation. And I always try to share Health and technology tips with people. Apart from Physiotherapy and being a tech savvy, I do explore more on Technology side and I keep sharing my findings with wider audience.

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